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Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE - 3.13) has been steadily moving higher in recent months, and today's option players are betting on additional upside in the near term. More than 37% of today's call volume has centered on YGE's deep out-of-the-money February 4 strike. About two-thirds of the roughly 1,100 contracts have crossed at the ask price, implied volatility was last seen 1.3 percentage points higher, and only five contracts currently make up open interest here, pointing to the initiation of new positions.
These calls are being bought to open for a volume-weighted average price (VWAP) of $0.05, indicating a breakeven mark of $4.05 (strike price plus VWAP). In other words, YGE needs to be trading more than 29% above current levels at the close on Friday, Feb. 15 (when front-month options expire), in order for these bets to be profitable. Delta at this strike is sitting at a low 10%, suggesting a 1-in-10 chance these calls will finish in the money by expiration.
YGE calls have been a favorite among option players in recent weeks, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the course of the past 10 sessions, speculators have bought to open more than 176 calls for every put on YGE. This call/put volume ratio of 176.29 ranks just one percentage point from a 52-week peak, indicating calls have been scooped up over puts at a near annual-high clip.
This bullishly skewed bias among traders isn't surprising, given the stock has rebounded around 150% from its all-time low of $1.25, which was tagged on Nov. 23. Additionally, the equity has outperformed the broader S&P 500 Index (SPX) by more than 66 percentage points during the last three months. The stock has charged roughly 3.3% higher in today's session, amid news the solar panel concern has supplied photovoltaic modules to Jordanian energy issue Kawkabuna for Energy Solutions, marking its first foray into the Middle Eastern country.
At last check, YGE was hovering near $3.13. Should the stock fail to muscle above $4.05 over the next two weeks, the most today's call buyers can lose is the modest premium paid.